Here’s how it works: A real-estate agent or broker identifies properties with severely depressed values. These could be properties with mortgages that exceed the present values or they could be short sales or foreclosures.

A property is valued using a “broker price opinion.” The broker’s “opinion” is a lowball price, because his intention is to profit from a quick resale for a higher price.

A lender, believing the broker’s assessment is legitimate and unaware of any scheming, agrees to the lower sales price.

The broker buys it at the greatly reduced price, arranges for a “straw buyer” to purchase it, then flips it for a higher price than negotiated with the lender. The broker pockets the profits.

The broker pays off any of the participants that enabled the scheme, and then moves to the next target property.

Misrepresentation

“This is a misrepresentation of value,” said Denise James, co-author of an annual report on the topic by the LexisNexis Mortgage Asset Research Institute, during a recent teleconference.

She said such schemes could add to problems faced by regions with an abundance of distressed housing, since “lenders will grow concerned with false depreciation of values,” thus making the buying and selling of homes even more difficult in depressed housing markets.

“Flopping increases as desperation to get rid of rising inventory grows,” she said.

While reports of fraud by 600 lenders and other real-estate businesses to the LexisNexis mortgage institute declined year over year, “the decrease does not necessarily correlate to actual occurrences of (fraud), which are rising according to several industry sources,” James said.

The list of crimes included short sales, bankruptcy abuse, debt-elimination scams, income and employment misrepresentation, Social Security number theft and loan-modification fraud.

Mortgage fraud has become more complex and is more difficult to verify, James said, because many lenders are trying to implement new procedures at the same time they are trying to recover huge financial losses.

Florida leads the list of states with high levels of fraud, with the institute’s index showing more than three times as many reports of fraud than legitimate mortgage originations.

One of the fastest-growing ways homeowners are being bilked is by people posing as the new servicers of their mortgages, she said.

“They (the homeowners) get letters saying, ‘I’m your new servicer. Send your payments to me,’ ” James said. “Homeowners who are not aware that there is a formal procedure involved in changing servicers” fall victim to this scam.